*Question: Why is The U.S. Dollar UP???***

Waiting to Blow - Bob Chapman

The US had very low interest rates for a long time, leading to an international carry trade. Banks, funds & other institutions would borrow in the U.S. at low rates, convert dollars to other currencies, and engage in different types of "investing" aka speculation.

Now as the investments go south, they have to liquidate and pay back the dollars. This means there is a huge demand for USD. This pushes the value up.

Strange, but true. All of the debts created a "synthetic short" against the dollar, as Richard Russel called it.

feud going on. One Crime Family jerked around another, and we are living through the fall-out. But, also that everything we read is propaganda all over the place so that we can not find out the truth....

In Christ,
Dave

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I'm in New Zealand right now and the New Zealand dollar plummetted this past week against the USD because people are panicking. There's a misguided belief that with the upcoming global recession, there's more safety in a bigger currency like the USD, as opposed to the currency of a tiny place like New Zealand. It's desperation and it will correct itself pretty soon, I suspect - once all the panic buyers who have no idea what they're doing have bought up whatever US Dollars they can the value will start to drop again and they'll jump ship to another currency.

=========================
Live Free or Die - Amen to that

when people rush out of the market they have to put their money into dollars.

Its pretty simple. Now it is a just a matter of time before out problems trump foreign ones and people rush out of the dollar and treasuries into something else.

Counterintuitive but isnt the supply of money reduced?
I have read that Trillions of dollars of wealth have evaporated with the stock market melt down. Unless you own stock , isnt that good?
Doesnt that act to counter the inflationary monetary policy, by having the accumulated surplus of the previous inflation all go up in smoke so to speak?

http://news.goldseek.com/...

1) Most (if not all) of the western economies are being hit by the credit crunch

2) All the Western Central Banks are inflating simultaneously. By acting in concert they are debasing all of their currencies simultaneously, and keeping their relative worth fairly constant.

3) Emerging economies are currently configured to supply western ones with raw resources (IE: Oil) and manufactured goods (IE: Cars and Electronics). We're tightening our belts and therefore their economies are not looking so hot.

All of the developed economies are being whacked by the credit crunch, all of the emerging economies are being hit by the resulting drop in consumer spending/oil prices, and the deleterious effects of inflating our currency have been minimized by the simultaneous inflation of most of the other 'strong' currencies. Investors have nowhere to run, and they have nowhere to hide and so they have chosen to park their investments in the USA, namely because they figure we've got the reserve currency, our politicians have had a more coordinated response than the EU, and they think we'll bounce back first (primarily because everyone else's economy hinges upon our rampant consumerism). To put it simply the US currency is holding up because folks are scared to death of all the other currencies.

the Dollar is up only because the Euro got smashed.... simple.... but don't worry... it's only up artificially and will be collapsing soon. YAY!

"Whether you think you can or think you cannot, you're absolutely right!"

Where does one go on line to find out the current M1, M2, M3. I am trying to educate myself further and would like to know. Also what is M1, M2, M3. Is M1 the actual printed bills in circulation? M2 are checks and M3 is credit? Anyone with this kind of education please share.
thanks
grant

here is an article I just read this morning:

Gold, the Dollar, and the Dollar Index
by Michael S. Rozeff

This article responds to a request to explain the recent strength in the dollar, by which I think was meant the dollar index. The following discussion explains some of the longer term factors that I think are important. This provides perspective on the recent movement. After that, the discussion turns to the question of gold prices.

A long-term view of the dollar index is here. The dollar index is not the dollar against gold. It is the dollar against other major currencies like the Euro, British pound, and yen. The current period of rally in the dollar (index) is from 74.82 to 82.46 today. The index had gone to a new long-term low and stabilized there for 5 months (March-July of 2008) before starting the current rally.

The dollar was strong in the early 1980s, as U.S. growth improved. However, the national debt rose sharply (it doubled) from 1980 to 1985. The 1985 Plaza Accord made matters worse. Despite the debt rise, the U.S. agreed to a weaker dollar. It also agreed to cut its budget deficit, which it didn't. By 1991, the debt had again doubled! The dollar fell sharply, from 164.72 to the 80s area where it stabilized. This was a 50% devaluation in terms of other currencies.

Increased U.S. debt is a factor that undermines the dollar. Better U.S. growth helps the dollar. The reason for this is that the dollar's value depends on its backing on the Federal Reserve's balance sheet. The backing consists of two main items: gold and U.S. Treasury debt securities. The backing of the U.S. bonds is the tax collections of the federal government. As the debt rises, all else equal, the greater debt must be serviced by the same amount of taxes. This reduces the debt's quality. The backing of the dollar worsens and it declines. The Fed could maintain the dollar's value by selling bonds, but it chooses not to do that because that tends to impact the economy negatively. As growth increases, all else equal, the dollar gains strength because the tax revenues improve and the dollar's bond backing improves in quality. The dollar index is also influenced by what the other countries are experiencing for their deficits and growth rates.

The dollar index mounted a strong rally starting in 1995 and through mid-2001. The debt rise in those years was "only" from 5 trillion to 6 trillion, which was at a far lower rate than when it was doubling every 5 years. The U.S. government ran a surplus at times and was able to retire some debt. The dollar's backing thus improved and so did its value. Meanwhile, growth was robust and that helped too.

The recession in 2001-2002 ended this rosy picture. Tax revenues fell as growth fell. Since government spending remained high, more bonds were issued. The growth of government debt accelerated sharply. The Bush administration added to this of its own accord by big rises in deficit spending. The dollar started falling in mid-2001 and really has not had a rally yet that clearly indicates a change in that trend.

The latest little rally is against some other currencies in the index whose economies have taken an even greater turn for the worse (except the strong yen). That is probably why the dollar index has shown some strength. As the U.S. enters another recession, which looks to be deep and prolonged, deficits will mount even more as growth slows. This is bad news for the dollar. The news will be bad for some other countries too that are in the dollar index, and the index need not decline if those other countries face even greater difficulties than the U.S..

The dollar index will strengthen if the next administration raises taxes and holds spending in line, as the Clinton administration did. An end to the Iraq war spending would help the dollar.

The dollar versus gold is another matter. They have to move inversely to one another. The course of gold prices tells that story. It is not all that easy to interpret the movements of gold. I analyzed gold versus money supplies in an article "$10,000 Gold" and an article "Gold at $635: Buy, Sell, or Hold?" The latter estimated a gold value of $656 to $1,099 based on M1 money supply and the monetary base. Using M2, the estimate was $3,100. The theory there, such as it was, was that gold more or less appreciated as the Fed increased the money supply per capita.

But it is obvious that gold's appreciation has been anything but smooth or even! See here. Gold had a tremendous rise in 1980 and then languished with ups and downs until mid-2001. The price rise of gold in 1980 was too far too fast in terms of the currency depreciations at that time. That is one reason why it stood still for so many years thereafter, albeit with some large interim fluctuations.

Since 2001, gold has risen as the dollar index has fallen, but it has risen more sharply because the other currencies have also fallen in terms of gold. This appreciation in gold coincides with a world-wide inflation of paper currencies. Gold caught up to the inflation, so to speak. As long as these central bank currencies continue to be manufactured without solid backing, either gold or tax revenues, gold will continue to have a long-term upward trend. The volatility in gold prices will, in all likelihood, also continue, and that makes it hard to forecast the shorter-term movements with a factor like money supply. Note that the big increases of recent days have not pushed gold to new highs. In the longer run, however, we can be quite sure that gold will move higher if nothing is done to improve the backing of the world’s central bank currencies.

October 11, 2008

Michael S. Rozeff [send him mail] is a retired Professor of Finance living in East Amherst, New York.

Copyright © 2008 LewRockwell.com

Michael S. Roz

its still the reserve currency of the world.

The dollar is up compared to other FIAT currencies, they are all losing value so the Dollar is not really up, it is just dropping slower than the ones it is compared to.

You should value your money on what essential commodities it can buy and not by comparing it to other FIAT currencies.

Dictionary:
FIAT (An authoritative command or order to do something; (an effectual decree).

FIAT CURRENCY (normally uncountable, but fiat currencies)

Money that is current (legal tender) for money debts by government fiat.

The dollar really isn't up, it's just that since most all world currencies are based on the dollar, then relative to it they are down. For example the dollar rose against the Brazilian Real 1.56 to 2.28. However real money, gold is still holding steady and about to rise, if it goes down, I know I am ready to buy. Although I am already prepared with land, food and supplies.
grant

Posted On: Friday, October 10, 2008, 7:06:00 PM EST

The Frying Pan or the Fire?

Author: Jim Sinclair

Dear Friends,

Stay the course or jump directly into the fire! That's the soundest advice I can give you in this highly volatile market period. I told you that you would see volatility in gold beyond your wildest imagination. That statement usually went along with my warning that by margining anything gold you were putting yourself in great financial risk.

Today has to seal the veracity of that advice. Now get a hold of yourself. There is absolutely no way governments can make a problem of this size go away over a weekend. Those that question me on this issue are the same ones that laughed in 2000 when I said the growth of OTC derivatives was going to break the world. I told the lead director of Bear Stearns at the time that OTC derivatives were going to break his firm but the profits from them was simply too intoxicating for anyone to listen. Now I am asking you to listen.

Whatever is done to resolve this global financial crisis is going to inject incomprehensible amounts of new money into the global financial system.

Academics see the world as a 'Picture In Time." That means they are static thinkers who can't perceive motion. Visionaries like Harry, Monty, Trader Dan & Tony are "Dynamic Thinkers." At present, some academics are promoting the dumbest line I have ever heard. They say that all this new money going into the system is not monetary inflation because it is simply replacing all the money lost and therefore is a wash. That is part of the thinking pattern I am talking about and it's dead wrong.

Dynamic thinkers know that the outflow of these losses has existed from the time of transaction and therefore prior to truer valuation as mandated by Financial Accounting Standards Board (FASB).

The day the FASB mandated truer value had existed for years but was not recognized as such because it was generally accounted for off balance sheet. Just because financial institutions tried to hide their losses, those capital depletions were already a growing cancer inside their organizations.

You can be certain that a repetition of Germany's Weimar crisis is coming soon. There is nothing that can be done to make matters better - even if done by governments unilaterally in a unified action. In fact, such action will only serve to make matters worse.

The larger the financial action, the deeper the financial fall. The G7 still thinks they run the world. That should tell you something about the degree of what they can do.

Gold is honest money that will push all crappy paper out of its way. Why do you think so much intervention took place in gold in US market hours today?

All I can tell you is to stay the course or jump directly into the fire! If the heat in the kitchen is too hot for you, there is nothing I can do for you.

Regards,
Jim Sinclair

"When governments fear the people there is liberty. When the people fear the government there is tyranny."
-Thomas Jefferson

I am more concerned about the return of my money than the return on my money. --Mark Twain

Yes, seems we're just *relatively* better off, not absolutely.

checkout:
http://bp3.blogger.com/_H...
From:
http://www.lewrockwell.co...

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POLITICS, n. A strife of interests masquerading as a contest of principles. The conduct of public affairs for private advantage. - Bierce
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It seems to have many differing forces at work at the same time. Demand for cash, exchange rates etc. I've found this "yen carry trade" issue very interesting and may hold some answers to the huge forces ripping at the financial system.

http://www.bloomberg.com/...

This article from March 17, 2008 was warning people to get their 401k's out of stock right after the Bear Stearns collapse. He seems to have been on the money (pardon the pun). He mostly again, talks about the yen carry trade.

http://realdealfinancial....

And there have been massive devaluations in the Euro and Pound Sterling.

http://uk.youtube.com/wat...

http://www.freedom-force....

Zeitgeist part 3: http://www2.b3ta.com/mind...

"Only a virtuous people are capable of freedom. As nations become corrupt and vicious, they have more need of masters." Benjamin Franklin
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Inflate Or Financial Tsunami by JayTaylor
http://www.gold-eagle.com...

In the article, Jay Taylor wrote,
"I can’t help remembering Bob Hoye’s constant refrain that when the global economy runs into trouble, the senior currency gets stronger. Why so? Bob reasons that debt is really a 'dollar short' position. When the debt has to be repaid, everyone scrambles to sell assets and buy dollars to answer the call of margin clerks."

Plus, prices are dropping everywhere.
0% deals on cars, restaurants, everywhere but the grocery store it seems

In Chile, the price of the dollar was at 560-570 Chilean Pesos for the past week or so. A couple of days ago though, the Chilean Central Bank has said that they're not purchasing any more dollars. And I told my dad that because of this, the dollar will fall back down again. I told him we have to enjoy the present for the time being but strap on for when the hit comes. And we're saving food. We might have a good advantage down here: it's already spring and we don't eat that much food during spring and summer, so we can stock up on more. And I have some business that needs taking care of in Easter Island but if this hits the world before XMas, I'm afraid my mother's land is going to have to wait. :(

because it's about to be dumped on a large scale. Those holding dollars are levering out of it....

Could it be that the rest of the world is in much worse shape than we are?